06 Apr Can debt collector force someone to pay an old debt?

Q. My friend is 76, on about $950 from Social Security, food stamps, Medicaid and literally the “kindness of strangers.” Her friends and neighbors help her by driving her where she needs to go, doctor appointments, church, etc. She has no family. She owns nothing except her ramshackle home — a house with no heat or hot water. Recently, she received letters from a collection agency looking for a $9,000 debt owed from about 10 years ago. It may have been a credit card she used when she became ill with cancer 10 or 12 years ago, but she isn’t sure. She can’t pay a dime on this. Can they make her pay? Is her house in jeopardy?
— A friend

A. We’re sorry to hear your friend is having such a rough time.

But she’s lucky to have caring friends like you.

Often, when people stop paying their old credit card debt, they think that the credit card companies won’t go after them, said Karra Kingston, a bankruptcy attorney in Union City.

But for many people, eventually, these creditors come back.

“In New Jersey, the statute of limitations to collect on credit card debt is six years,” Kingston said. “The statute of limitations refers to the window of opportunity in which a creditor can file a civil lawsuit to collect on the debt.”

In New Jersey, after six years has passed, the debt is considered “time barred debt,” she said. This means that if the creditor is trying to collect, you can go to court and argue that it’s passed the statute of limitations and therefore, time barred.

While the statute of limitations can run, this doesn’t stop a collection agency from being able to collect the debt, Kingston said. This simply means that they can’t be sued.

“If the statute of limitations hasn’t run, this means the debt collector can still bring a lawsuit. If the debt collector wins the lawsuit, they will get a judgment against the debtor for the outstanding debt,” Kingston said. “When this happens, they are able to collect the judgment amount by putting liens on property, garnishing wages, and levying bank accounts.”

Kingston said sometimes, individuals with outstanding debt can settle their debt with the creditors or debt collectors. To do this, they would ask the company to take less than what is owed, she said.

It’s important to keep in mind that settling debt has tax consequences. Therefore, you could be hit with a tax bill at the end of the year for the forgiven amount, Kingston said.

If your friend has other debt or the statute of limitations hasn’t run, bankruptcy may also be an option, she said, which allows individuals to get a fresh start.

“Many people use bankruptcy as a tool to get back on their feet and start over,” she said. “Chapter 7 bankruptcy allows individuals to discharge their debt and start over, whereas, Chapter 13 bankruptcy allows individuals to enter into a three- to five-year repayment plan.”

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This story was originally published on April 6, 2022.

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